TaxTMI 
TaxTMI 
2026 (2) TMI 1225
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....beeb Faaeq, Adv. Ms. Nandini Kaushik, Adv. Mr. Siddharth Venugopal, Adv. Ms. Umang Motiyani, Adv. Ms. Prakriti Rastogi, Adv. Ms. Aryama Singh Rajput, Adv. For the Respondent(s): Mr. S Dwarakanath, A.S.G. Mr. Rajat Nair, Adv. Mr. Zoheb Hussain, Adv. Mrs. Gargi Khanna, Adv. Mr. Sachin Sharma, Adv. Mrs. Madhulika Upadhyay Aor, Adv. Mr. Shashank Bajpai, Adv. Mr. Raj Bahadur Yadav, AOR Mr. S. Dwarakanath, A.S.G. Mr. Rajat Vaishnaw, Adv. Mr. Prabhakar Yadav, Adv. Mr. H. Siddharth Bhandari, Adv. Mr. Mudit Bansal, Adv. Mr. S. Vijay Adithya, Adv. Mr. Abhyudey Kabra, Adv. Ms. Madhulika Upadhyay, AOR Mr. P B Suresh, Sr. Adv. Mr. Balaji Srinivasan, AOR Mr. K Gowtham Kumar, Adv. Mr. Vishwaditya Sharma, Adv. Ms. Deeksha Gupta, Adv. Ms. Harsha Tripathi, Adv. Ms. Kanishka Singh, Adv. Mr. Subornadeep Bhattacharjee, Adv. Mr. K Shiva, Adv. Mr. Rohan Dewan, Adv., Ms. Aakriti Priya, Adv. Mr. Udayaditya Banerjee, Adv. Ms. Suganya T.s., Adv. Mr. Parikshit Pitale, Adv. Mr. Krishnan Venugopal, Sr. Adv. Mr. Krishnan Agarwal, Adv. Ms. Elamathi M.S., Adv. Mr. Harnoor Singh, Adv. Mr. Shivendra Singh, AOR Mr. Labeeb Faaeq, Adv. Ms. Nandini Kaushik, Adv. Mr. Siddharth Venugopal, Adv. Ms. Umang Motiyani,....
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....tained explicit references to asset purchases made during the demonetization period i.e. November-December 2016, through entries marked "Patel: Sugar 386 + Bank Loan" and "Sugar Mill, Kancheepuram". Further, investigation identified advocate S. Senthil as the intermediary who, upon confrontation, admitted under oath to authoring these notes at the dictation of V.K. Sasikala for purchasing these properties using demonetised currency. 5. The documentary trail was further corroborated by a subsequent search on 18.11.2017 at a serviced apartment used by the intermediary, where authorities recovered the original share certificates of M/s S.V. Sugar Mills Ltd. now Padmaadevi Sugars Ltd. standing in the names of the Patel family members, alongside an unsigned Memorandum of Understanding (MoU). Confronted with this, Shri Hitesh Shivgan Patel, representing the management of the corporate debtor, recorded a sworn statement admitting that the Patel Group had negotiated the sale of the sugar factory and assumed bank liabilities for a total consideration of Rs. 450 Crores. Crucially, he admitted that this consideration was received entirely in demonetised currency between November and Decemb....
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....y the RP was rendered infructuous. Consequently, the liquidator filed a fresh application seeking a stay on the attachment order and to enable the liquidation process to continue on the ground that the attached properties formed part of the liquidation estate. 10. The NCLT took up the application and by its order dated 25.04.2022, in the case of Padmaadevi Sugars, held that the challenge to the order of attachment under the Benami Act must be before the statutory authorities under that Act and not before the authorities under the IBC. In other words, NCLT held that such an application is not maintainable under IBC. Similar orders were passed by NCLT even in case of M/s Senthil Papers on 29.03.2022. 11. Despite the clear and categorical order dated 25.04.2022 of the NCLT, the appellants filed an application for clarification about the forum before which the application is to be filed. Disposing the application, the NCLT, by order dated 14.06.2022, held that the parties can approach the authorities under the Benami Act for lifting the attachment, thereby reaffirming that it lacked jurisdiction to sit in appeal over decisions of Benami Authorities. 12. Even after the order da....
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....pon the NCLT under Section 60(5) of the IBC is not all- pervasive. While Section 60(5)(c) empowers the NCLT to decide questions of law or fact "arising out of or in relation to" the insolvency resolution, this jurisdiction does not extend to reviewing administrative or quasi-judicial orders passed under independent public law statutes. The NCLAT opined that determining whether a property is "benami" or not requires a trial on the pedigree of the title and the source of funds, which falls exclusively within the domain of the Adjudicating Authority under the Benami Act. Consequently, a challenge to the legality of the attachment order is not a question "arising out of" the insolvency, but one arising dehors the insolvency, and thus falls outside the NCLT's jurisdictional competence. III. Submissions of the Parties: 14. Submissions on behalf of the appellants: We have heard Mr. Krishnan Venugopal, Mr. Sajan Poovayya, and Mr. Rajiv Shakdher, Ld. Sr. Counsels appearing on behalf of the Appellants. The sum and summation of the submissions put forth can be articulated as: 14.1 Granting precedence to proceedings under the Benami Act over insolvency proceedings would result in ....
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.... CIRP within 330 days. Proceedings under the Benami Act, along with the appellate remedies thereunder, operate on significantly longer timelines. Allowing attachment proceedings to run parallel to insolvency would stall the CIRP, frustrate resolution, and prevent attainment of the stage contemplated under Section 32A, namely approval of a resolution plan or consummation of liquidation sale. The statutory balance preserves accountability of wrongdoers under Sections 3 and 53 of the Benami Act, while ensuring that the insolvency process itself is not derailed. 14.7 Revenue stands in the position of an operational creditor and is bound by the waterfall mechanism under Section 53 of the IBC. 14.8 On facts, it is contended that the alleged "taint" arising from shareholders' funds utilised for share acquisitions in 2016 cannot be imputed to immovable properties of the corporate debtor that were lawfully acquired between 1995 and 2013. The company is a distinct juristic entity and its property cannot be treated as that of its shareholders. [Bacha F. Guzdar v. Commissioner of Income Tax, Bombay (1954) 2 SCC 563] 14.9 Section 60(5) vests the NCLT with exclusive jurisdiction over al....
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....se benami property. Section 14 moratorium protects the debtor's estate from creditor action, not sovereign in rem proceedings under penal statutes 15.8 The Benami Act governs determination and confiscation of benami property, while IBC governs insolvency resolution of assets beneficially owned by the debtor. Where property stands attached and vested under the Benami Act, it lies outside the liquidation estate and outside NCLT jurisdiction. IV. Analysis and Conclusions: 16. The question that arises for consideration is whether, the legality and validity of an order of attachment under Benami Act can be challenged before the statutory tribunals under IBC. The enquiry should legitimately commence with appreciating the scope and ambit of the Benami Act as well as IBC. 17. Scheme of the Benami Act: Historically, benami transactions constituted a recognised and prevalent mode of holding property in India and were not, per se, unlawful. Such transactions involved the purchase of property in the name of one person while the consideration was furnished by another, the latter being the real owner. The practice was both recognised as a custom and given legislative recognition thro....
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....asons of the Amending Act makes it succinctly clear as to why a sea of changes were brought in, thereby expanding the old Act from 9 Sections to now 70 Sections divided in 8 Chapters. The relevant portion of Statement of Objects is reproduced below for ready reference: "Statement of Objects and Reasons Amending Act 43 of 2016.- The Benami Transactions (Prohibition) Act, 1988 was enacted to prohibit benami transactions and the right to recover property held benami. The said Act, inter alia, provides that- (a) all the properties held benami shall be subject to acquisition by such authority in such manner and after following such procedure as may be prescribed; (b) no amount shall be payable for the acquisition of any property held benami; (c) the purchase of property by any person in the name of his wife or unmarried daughter for their benefit would not be benami transaction; (d) the securities held by a depository as registered owner under the provisions of the Depositories Act, 1996 or participant as an agent of a depository would not be benami transactions. 2. During the administration of the Benami Transactions (Prohi....
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..... 17.6 If such a finding is returned, Section 27 provides for confiscation of the property, and sub-section (3) makes it clear that upon confiscation the property vests absolutely in the Central Government, free from all encumbrances and without compensation. Section 29 enables the Administrator to take possession and deal with the confiscated property in accordance with law. The statutory progression, starting from issuance of notice, to provisional attachment, to adjudication, and finally to confiscation and possession, reflects a structured process in which deprivation of title follows only upon compliance with the prescribed safeguards. 17.7 The Act also establishes a distinct adjudicatory hierarchy and demarcates jurisdictional boundaries. Section 45 bars the jurisdiction of civil courts in respect of matters that the authorities or the Appellate Tribunal are empowered to determine. Section 46 provides for appeals to the Appellate Tribunal against orders of the Adjudicating Authority, with a further appeal to the High Court on questions of law. Section 53 prescribes stringent punishment for benami transactions entered into to defeat law, avoid statutory dues or defraud c....
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....ort the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark.... 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests...." 18.2 The legislative scheme of IBC has also been explained in Embassy Property Deve....
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....t inconsistency between the two statutory regimes requires examination. 20. Two Conflicting Statutory Regime: It has been argued by the appellants that IBC being a special statue must prevail over Benami Act and hence NCLT is competent to adjudicate upon a challenge made to attachment proceedings under Benami Act by virtue of it being a special as well as later law. To this extent, reliance is placed on Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. (2001) 3 SCC 71. At the same time, it must be borne in mind that the Benami Act is also a special legislation aimed at prohibiting and penalising benami transactions. What therefore must be seen is the dominant purpose and object of both the enactments. 20.1 In a recent decision, this Court had the occasion to examine the competing application of two special statutes. Analysing the position of law, in State Bank of India v. Union of India 2026 INSC 153. (Hereinafter, SBI) summarised the principles to be followed in case there is a conflict between two statutory regimes. The relevant paragraphs are as under: "64. When confronted with a situation where two statutory enactments appear to operate in conflict, this....
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....see the subject and the dominant purpose for which the special enactment was made and in case the dominant purpose is covered by that contingencies, then notwithstanding that the Act might have come at a later point of time still the intention can be ascertained by looking to the objects and reasons.^6" (emphasis supplied) 20.2 On behalf of the appellants, it was urged that in present case, IBC, being the later and more comprehensive insolvency legislation, must therefore govern in the event of conflict on basis of the principle of leges posteriores priores contrarias abrogant. However, the fact that, the property which is sought to be included in the liquidation estate has been provisionally attached for being a benami property, cannot be lost sight of. 20.3 Benami Act is a complete and self-contained code governing identification, provisional attachment, adjudication and confiscation of benami property, supported by a distinct appellate hierarchy. Exclusive jurisdiction over such determinations is conferred upon authorities constituted under the Benami Act. The IBC neither displaces this statutory mechanism nor empowers the NCLT to reopen findings rendered thereund....
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....ext. Merely because spectrum can be treated as an "asset" on the basis of certain attributes, such as possession and usage, lease and assignment, claim and liability or credit and debt, the entirety of the telecom sector cannot be brought under the sweep of IBC. The two statutes have different subjects to deal with, different purposes to subserve, different laws to abide, protect different rights and create different liabilities. It is necessary for the constitutional courts to recognise their respective provinces and to ensure that they operate with harmony and without conflict." (emphasis supplied) 20.6 What emerges from the foregoing analysis is that the jurisdiction of authorities under IBC cannot be expansively construed so as to trench upon fields that are founded in public law domain. Where the subject matter of the dispute pertains to the exercise of sovereign statutory power, particularly in relation to determination of legality of title, attachment, or confiscation and vesting thereof, the adjudicatory fora under the IBC must necessarily yield to the specialised mechanism created by such statute. Proceedings under Benami Act squarely fall within the public law....
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....his assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word "assets", while Section 20(1) uses the word "property" together with the word "value". Sections 18 and 25 do not use the expression "property". Another important aspect is that under Section 25(2)(b) of the IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Sections 25(1) and 25(2)(b) reads as follows: "25. Duties of resolution professional.-(1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions: (a) *** (b) represent and act on b....
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....rd parties from the liquidation estate. In Controller of Estate Duty, Lucknow v. Aloke Mitra (1981) 2 SCC 121 this Court reiterated that a benamidar possesses no beneficial interest and that title vests in the person who provided consideration. Where the corporate debtor is merely an ostensible holder, the property never forms part of its estate and cannot be administered in liquidation. 22. Section 36(3)(e) further recognises that property "subject to determination by a court or authority" forms part of the estate only to the extent of such determination. Once the Adjudicating Authority under the Benami Act has concluded that the corporate debtor is a benamidar, beneficial ownership stands negated. The legality and validity of such determinations are subject matter of appeal under the provisions of Benami Act alone. Insolvency proceedings cannot be utilised to convert property held for another into distributable assets for creditors. The IBC contemplates distribution of the debtor's estate, not assets impressed with a trust or held on behalf of a third party. 23. The reliance placed on Section 32A and the moratorium under Section 14 is answered on statutory grounds. Section ....
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....ces, the appeals have to be dismissed with exemplary costs. 28. For the reasons stated above, all the appeals are dismissed with costs quantified at Rs. 5 lakhs each. The amount shall be deposited with the Supreme Court Advocates on Record Association (SCAORA) within four weeks from the date of passing of this judgment. ------------------------ * Rectification Order MISC. APPLICATION NO. ______ OF 2026 [Diary No(s). 19449 OF 2026] IN CIVIL APPEAL NO. 7140 OF 2022 Dated 14-05-2026 ORDER 1. By this application, the applicants, M/s Indian Overseas Bank and Bank of India, seek modification of observations in paragraph 20.8 of our judgment dated 24.02.2026 in Civil Appeal No. 7140 of 2022. The relevant portion of paragraph 20.8 is reproduced as under:- "20.8 The properties in question, having been provisionally attached and confirmed by the Adjudicating Authority under the Benami Act, stand vested in the Central Government under Section 27, subject to statutory appeal. XXX" 2. The application is allowed, and paragraph 20.8 of our judgment dated 24.2.2026 shall now be substituted as under:- "20.8 The properties in que....